Tuesday, July 17, 2012

I know what you are thinking.... from the looks of the posts the last many months, it appears that I have been on vacation for some time now!

This is true... this blog has been on an auto-pilot of sorts for most of a year now as I have taken a healthy rest from daily blogging, mostly updating the data-only posts and forgoing the more creative ones.

Possibly an extended vacation will work to break me out of this bout of "blogger-burnout" but who knows... I almost got back at it a few days ago after listening to that nincompoop Paul Krugman talk about his new book on NPRs On Point... my hackles were UP!!... yet I still couldn't muster the creative energy to post a retort.

Oh well... so I'm off to France for an extended stay and hopefully, given the extra leisure time, I'll be able to collect my thoughts (mostly for my benefit) on the state of the "recovery" and the outlook going forward.

One thing does occur to me though... while Krugman's prescription of even more government spending seems completely ludicrous from any but the most left-leaning Keynesian vantage point, his assessment of the weakness of the "recovery" is, in in my estimation, very accurate.

The "recovery" has been weak and the "jobless recovery" function more pronounced than ever before begging the question... what will the landscape look like when (the inevitable) next recession comes?

Should the job market and other major macro indicators not heal sufficiently, the next turn down will likely come with an exceedingly depressive force.

For most of the post-WWII era, each expansion propelled the U.S. economy from the depths of a recession beyond the the level (of activity, job creation, participation rate, production, etc.) set at height of the prior expansion.

In this way, economic indicators depicted the economy to be on an constantly cyclical path that always was leading generally uphill... a geometric quirk I know... but there is something very pure in that pattern.

No matter how bad a recession you were in, eventually, in the near future, you could count on the economy to meet and exceed its past best performance.

It hasn't been that way for a long time now...

Since 2000, when telltale signs of erosion (or simply of fundamental change) of this pattern first became visible in the participation rate, the breakdown of this true recovery function seems to have become more prominent.

If the current "recovery" does NOT succeed in truly besting its last best performance (of 2006), I think it will be very hard to sweep under the rug... in fact, it will likely be unmistakable.

So in that respect I suppose Krugman is right... things may be more dire than we would like to accept... yet turning to even more government spending to prop things up or stoke some sort of fictional Keynesian macro-economy starter seems foolish in the least.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 2.65 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.14 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.79 million people on state and federal unemployment rolls.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined to 3.71% since last week while the purchase application volume increased 3.0% and the refinance application volume declined 3.0% over the same period.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

Tuesday, July 10, 2012

Recently, the University of Hong Kong released their Hong Kong Residential Real Estate Series (HKU-REIS) indicating that, in April, the price of residential properties increased a notable 3.23% since March and climbed 7.11% above the level seen in April 2011.

It appears that after a notable pullback in late-2011 prices are totally soaring with all measures rising notably on the month.

The HKU-REIS is a set of property price indices constructed monthly using a “modified” repeat-sale methodology similar to that of the S&P/Case-Shiller indices yet suited to the Hong Kong property market.

Monday, July 09, 2012

As I have noted in the past, since the home price index data provided by Radar Logic is more timely, unadjusted and un-smoothed it is particularly useful for gaining deeper visibility over our housing markets.

As for the latest trends, it’s important to note that the 25-MSA Composite is showing the first year-over-year gins seen since mid-2010 while prices continue to bounce from the lows set in late-January.

The latest data shows that as of early-May, prices have increased 0.01% above the level seen in May 2011 continuing the pattern of past years with prices now heading higher as the data moves into the typically more active spring selling season.

Friday, July 06, 2012

Today’s Employment Situation Report indicated that in June, net nonfarm payrolls increased only slightly with private nonfarm payrolls adding just 84,000 jobs while the unemployment rate went flat at 8.2% over the same period.

Net private sector jobs increased 0.08% since last month climbing 1.78% above the level seen a year ago but but remained a whopping 3.86% below the peak level of employment seen in December 2007.

Today's employment situation report showed that conditions for the long term unemployed generally improved in June but remained epically distressed by historic standards.

Workers unemployed 27 weeks or more declined to 5.370 million or 41.9% of all unemployed workers while the median number of weeks unemployed declined to 19.8 weeks and the average stay on unemployment climbed to 39.9 weeks.

Looking at the charts below (click for super interactive versions) you can see that today’s sorry situation far exceeds even the conditions seen during the double-dip recessionary period of the early 1980s, long considered by economists to be the worst period of unemployment since the Great Depression.

Today’s Employment Situation report showed that in June “total unemployment” including all marginally attached workers increased to 14.9% while the traditionally reported unemployment rate went flat at 8.2%.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit definition of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

Thursday, July 05, 2012

Today, private staffing and business services firm ADP released the latest installment of their National Employment Report indicating that the situation for private employment in the U.S. improved in June as private employers added 176,000 jobs in the month bringing the total employment level 1.81% above the level seen in June 2012.

Perusing the rest of the data in the ADP dataset you can see the the economy is currently showing the most growth for small to mid-sized service providing jobs with goods-producing jobs remaining near trough levels.

Look for Friday’s BLS Employment Situation Report to likely show somewhat similar trends.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 2.67 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.11 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.79 million people on state and federal unemployment rolls.

On a month-to-month basis, total residential spending increased 2.96% from April and rose 4.94% above the level seen in May 2011 while remaining a whopping 61.37% below the peak level seen in 2006.

Single family construction spending climbed 1.82% since April rising 15.54% since May 2011 but remained a whopping 74.22% below it's peak in 2006.

Non-residential construction spending rose 0.38% since April and climbed 15.11% above the level seen in May 2011 but remained a whopping 29.84% below the peak level reached in October 2008.

The following charts (click for larger dynamic versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year, month-to-month and peak percent change to each since 1994 and 2000 – 2005.